The wall of worry is real. The non-stop news coverage about the election, virus aid package negotiation and the resurgence of the virus in the coming flu season can attest to the validity of the worries. Yet, the market has had its own mind ever since the March 2020 low. It just kept going higher without all the worries.
The NASDAQ bounced from support at 10500 level twice last Monday (9/21/2020) and Thursday (9/24/2020). Despite the continued choppy selloff in the NASDAQ since the September 2nd top, there are some amazing pockets of strength in individual stocks which led us to believe that pervasive fear is absent at the moment in the market.
Last week the three major indices made some small progress on the downside compared to the week before. Underneath the indices, there are some notable sector rotations going on. And more interestingly, there are several small cap genomic stocks breaking out which led us believe that this correction is a focused correction, not a universal selloff that drags down almost every single stock.
Last week the three indices made some progress on the downside, but it is a mixed picture with the NASDAQ leading the way down while the Dow and S&P 500 closed above their 50-day moving average. When we have a mixed picture like this, it is normally signifying buyers are present. Perhaps the latecomers who missed the party are buying value stocks now.
The major indices rallied not stop in August, totally defied the potential seasonal pattern of August being the month of a summer high. The S&P 500 took out February 2020 high and formed a clean breakout. What’s transpired the last two months is a great sign for the intermediate term. However, a pullback is truly a matter of “when” not “if”.
