While the Nasdaq 100 made new all-time highs today climbing over 20,000, all the Magnificent 7 stocks and investors cheered!
And as they should. After all, it’s been all about growth stocks for years and every dip has been a buy. And this has the Nasdaq 100 etf (NASDAQ:QQQ) flying high.
Our quant models are happy. Momentum trading has paid off for our clients in an almost surreal way.
However, in Trump’s America, the market should broaden out.
He sees an increasing presence of US manufacturing and mining. He does not see Apple and Google as the economy’s saving grace. He sees a strong consumer and small businesses thriving.
The buzz is American Exceptionalism.
So yes, let’s cheer for Amazon, Microsoft, Google and Nvidia.
But, unless the market continues to broaden, we can almost take the Magnificent 7 stocks outperforming as a lack of confidence in Trumps vision.
Unless small caps and the Russell 2000 (NYSEARCA:IWM) can deliver.
The CPI report is a factor as well. The Magnificent 7 stocks are basically inflation proof, to a point. And this has helped the Nasdaq 100 and QQQ rally.
Small caps, however, firmed but well under-performed today.
The Russell 2000 (IWM) weekly chart is not bad looking. Don’t get me wrong.
Three weeks ago, IWM made a new high at 244.98. Since then, we have seen a $9 correction with today’s action flirting with the closing levels of last week.
Yes, IWM outperforms SPY.
Real Motion though shows us that until the 50-DMA clears back over the 200-DMA, IWM has meh momentum.
Elsewhere, the Retail sector (XRT) is consolidating at the higher levels, so that helps.
But the Transportation sector (IYT) closed red.
So, what’s it going to take for the market to broaden and put Trump’s promise into fruition?
The Federal Reserve lowering rates will help, however, that could trigger higher commodity prices.
Inflation is a concern as the yields began softer and ended the day higher.
This is a delicate dance.
Yay for growth, but investors need confidence in inflation behaving, the US debt decreasing, and Trump delivering on the Made in America notion.
We can muse of course, but if indeed IWM clears 245 and doesn’t look back, I’ll play along.
Twitter: @marketminute
The author may have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not represent the views or opinions of any other person or entity.
