Momentum Monday – Crypto and Financials Remain Strong

The post-election rally didn’t last long. Most of the gains were quickly reversed over the past week. The main exception to the rule has been anything related to crypto which added to its gains last week – COIN, IBIT, BITX, TSLA, MSTR, etc. Miners like MARA pulled back from their post-election highs but showed relative strength on Friday.

Some will say the reversal signifies that Trump’s victory was priced in. Others can opine that the market has already had two solid back-to-back years and it is normal to see some profit-taking in the face of some uncertainty that comes with the new administration. Both of those reasons could be true or wrong. The reasons are not that important. The rise in volatility is. Maybe we became too accustomed to the low-volatility rally that lifted most boats in the past two years. Maybe, we are entering a new market regime that will be a lot more volatile and the indexes will test their 50-day moving average more often. An environment in which compounding short-term swing is likely to work much better than position trading and buy-and-hold.

Semiconductors – the top leader of 2023 and the first half of 2024, have been under heavy pressure lately. SMH is not far from testing its 200-day moving average gain. NVDA reports earnings next week – an event that could save or break the sector. NVDA is not a sure bet anymore. Their biggest client, SMCI is about to be delisted from the Nasdaq stock exchange for non-compience. NVDA beat earnings estimates three months ago and still dropped 20%. The decline coincided with a weakness in the general market but was significant. It has managed to recover to near all-time highs since then but it’s anyone’s guess how the market will respond to its earnings. People tend to look for reasons to sell during choppy, corrective tapes.