Hey trader,
Consumer Discretionary was the best sector last week. Energy leads on every other timeframe.
A growth sector taking the one-week column while everyone is calling for collapse is the thing I’ve been waiting on. Here’s why that combination matters more than the Warsh headlines did.
Consumer Discretionary Surges as Economy Teeters on Collapse?
There’s a lot of negativity out there right now, understandably so. The momentum trade has gone through a historic collapse, and it took some money managers with it.
Ask yourself this question – is that the type of thing you’d see at a market bottom or a market top? Both the S&P and Nasdaq have corrected for about 2 months. The S&P has been going sideways more than anything, but the Nasdaq managed to drop 11% from its all-time high.
That’s a standard, run of the mill correction.
Now, amidst all the chaos, you had two blockbuster earnings reports come out last week in Amazon and Microsoft.
I’ve been pounding the table on the software trade, and Microsoft’s move was the confirmation signal. Still, that wasn’t enough to make tech the strongest-performing sector of the week.
Coming out of market bottoms, I need to see a growth-oriented sector outperform.
Amazon’s earnings were incredible. The stock soared double-digits and closed at its highest monthly level in history (here’s your reminder to review those monthly charts while they’re still fresh).
The bid was so strong it sent the consumer discretionary sector soaring. I have a hard time thinking everything is about to fall apart with a sector like that outperforming near-term.
Combined with last week’s wide trading range and close well off the lows, this is a bottoming setup that I’ve seen countless times in my career.
Now we just need follow through. If growth delivers again this week, bears are about to be in for a world of pain.
Stay tuned and talk soon,
Gianni
