We have some sloppy action to kick off the week and the market fails to build on Friday's big move. The primary issue is the FANG names, which are underperforming again and driving the Nasdaq 100 ETF (QQQ) to fill the gap that was created on Friday morning.
Small-caps are lagging also, which is reflected in breadth that is running slightly negative The number of new highs are down quite a bit and we even have weakness in the speculative blockchain sector, which has been extremely active lately.
This is an interesting setup for the FANG names, some of which report earnings this week. Expectations have gotten very high for the group and it will help to avoid a "sell the news" reaction if they are weak into the reports.
I mentioned on Friday that the action reminded ma a bit of what happened after Trump's speech before a joint session of Congress back at the end of February. Although there was nothing particularly new, the market gapped up and had a very euphoric response. The following day there was a reversal and that resulted in a down trend that lasted until late April.
Circumstances are very different now, but we'll see if this develops in the same way. The fact that it's earnings session is one big difference.
I've made a few minor sales and started a new position in Qudian Inc. (QD) . Qudian is a China-based micro lender that had a very successful initial public offering last week. The stock is weak today on a news story that Chinese regulators may crack down on the industry. I suspect this actually may be beneficial to QD as the crackdown is aimed at unscrupulous lenders who are taking business away from QD. I started a position and will add further as the chart develops.