The overall market is holding up extremely well, as the poor earnings from Microsoft (MSFT) and Alphabet (GOOGL) are having a very limited impact on the broad market. The reports are being viewed as sector-specific, and buyers are looking to put money to work in other areas.
Breadth is running at around two to one positive, and new 12-month lows have contracted to less than 50 names. Small-caps (IWM) , biotechnology (IBB) and more speculative names are leading.
For years a small group of big-cap technology names covered up weakness in the broader market. Today we have the inverse with the weakness in the big-cap tech names being offset by the broader market.
The strength outside of technology is being driven primarily by shifting macro concerns. Bonds are strong again, the dollar is sinking, and Canada just hiked rates at a smaller-than-expected amount of 0.5% rather than 0.75%. Political pressure in Canada is causing less hawkishness because of concerns that the credit market will hurt housing. In addition, the Bank of Canada noted that it is starting to see weakening demand from the US.
The shift in the macroeconomic focus from inflation to growth, combined with favorable technical patterns, is keeping the bounce going.
I've been adding some exposure in a few names, such as Rocket Pharmaceuticals (RCKT) , Sensus Healthcare (SRTS) , Provention Bio (PRVB) , Beyond Air (XAIR) , and my Stock of the Week, Harmony Biosciences (HRMY) . Other stocks that have been named stock of the week, such as Aehr Test Systems (AEHR) and Genius Sports (GENI) , are becoming too extended to add at this point.
I'd like to add more long exposure but I'm not going to chase bad entry points. There will be plenty of opportunities to add more long exposure as things develop, and I will do so very incrementally.
Keep in mind that we have a slew of earnings reports coming up, and as Microsoft and Alphabet made clear, there are plenty of concerns that growth is slowing.
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