Stocks End Week High As Great Mini Rotation Unfolds



Week-In-Review: Stocks End Week High As Great Mini Rotation Unfolds

Stocks rallied last week as investors digested a slew of earnings and economic data. After all was said and done, the market ended higher as investors rotated out of the leading high beta areas of the market and moved into the lower beta areas which have been lagging since the March low. Tech stocks and gold stocks have been some of the leading areas of late while the lagging areas such as the Russell 2000, DJIA, Transportation, Hospitality, and Financial stocks were lagging in recent months. This phenomenon is what I call the Great Mini Rotation and it is perfectly normal and healthy to see money rotate every now and again out of leading areas into undervalued lagging areas. For now, the bulls remain in control as long as the major indices stay above their respective 50 DMA lines.

Monday-Wednesday’s Action:

Stocks rallied nicely on Monday as the Nasdaq closed at a fresh record. Tech stocks continued to soar as Microsoft talked about buying a piece of the Chinese social media giant TikTok. Stocks ended higher on Tuesday after House Speaker Nancy Pelosi said that she, Senate Minority Leader Chuck Schumer and White House chief of staff Mark Meadows held “productive” discussions on Monday regarding the next stimulus package. Elsewhere, a slew of earnings were released and investors continued to digest the data. Disney reported a profitable quarter and said it now has more than 100 million subscribers to Disney +. Stocks rallied nicely on Wednesday as investors digested a slew of earnings.

Thursday & Friday Action:

Stocks rallied on Thursday as hope spread that a deal will be reached regarding the next round of fiscal stimulus. Once again, tech stocks led teh way higher helping the Nasdaq jump above 11,0000. Before Friday’s open, Labor Department said U.S. employers added 1.8M beating the Street’s estimate for a gain of 1.48M. Meanwhile, the unemployment rate slid to 10.2%, also beating estimates. Separately, high beta stocks fell as lower beta stocks caught a nice bid.  

Market Outlook: Flood The System With Liquidity 
Global governments and global central banks stepped in with massive rate cuts and other “aid” packages to help “stimulate” both Main Street and Wall Street. So far, it is working as intended. As long as March’s lows hold, the market will likely move sideways to higher. On the other hand, if March’s lows are breached, then look out below. As always, keep your losses small and never argue with the tape.

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