Over the past month, we've started to see a distinct change in character in market action. For about two years, stock market conditions have been very difficult, with the S&P 500 falling over 25% from its' 2021 high. However, since the 2022 low, the S&P 500 has been rallying upward, especially after capitulating in March 2023. The first positive action came from large cap stocks like META, Netflix, TSLA, and NVDA. Now, we are starting to see signs of strength from smaller cap stocks as evident in the chart of the Russell 2000 below. In addition, growth stocks are beginning to participate as we have seen in stocks like PLTR, MNDY, and the FFTY ETF. ABNB and UPST have also showed quite impressive action. One of the themes I have noticed is that many of the hot IPOs from late 2020-early 2021 like PLTR, ABNB, and UPST that went through deep corrections in 2022 are now starting to see institutional money flow into them. This is an excellent indication that things are starting to heat up.
If you missed buys in some of these, it's not a good idea to chase them. Wait for proper entries so that you can manage your risk. However, if you've been caught up in the gloom and doom of the news, it's always best to let the charts have the final say. I make it a point to see what people say to me about the stock market when I'm at social events. Just this past July 4th, I was at my fiancée's family barbeque and her cousins remarked to me about how dangerous the stock market is. One even recounted how a friend lost over $60,000 holding a stock as it collapsed in 2022. A frequent theme that keeps popping up in these anecdotal conversations is how its' best to just put your money in a CD than have to deal with the volatility of the stock market. When I hear these type of statements while looking at charts like the ones in this post, I know everything I need to in order to gauge the market environment.
Risk right. Sit tight.
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Full Disclosure: I currently own PLTR, MNDY, IWM, QQQ, and SPY.
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