Mag Seven Names Choppy as Investors Prepare for Small-Cap Earnings
Mixed results from Big Tech put an end to upside momentum to close out October.
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Solid earnings from Amazon (AMZN) and Apple (AAPL) helped the bullish cause on Friday, but upside momentum was limited as Microsoft (MSFT) and Meta (META) continued to struggle. Breadth was good, with 57% of stocks advancing, but there were only 120 new 12-month highs, which reflects ongoing rotational action.
The bright spot on Friday was the Russell 2000 (IWM) , which gained 0.5%. There was a long list of smaller stocks that gained more than 10%, reflecting continued speculative interest. While corrective action is taking place primarily in technology, there is still a very healthy appetite for secondary stocks with strong charts and appealing fundamentals.
Small-cap earnings will be the focus for the next two weeks, and then Nvidia (NVDA) will wrap things up on November 19. Small caps do not consistently beat estimates like their S&P 500 cousins, so there will be much higher volatility, but volatility combined with mis-pricing is what creates the best trading opportunities.
There is plenty of debate about whether the indices can continue to trend higher for the rest of the year. There is positive seasonality to help, but the focus should be on picking individual stocks rather than worrying too much about the indices. The indices are essentially just the Mag Seven names, and the best opportunities will likely lie elsewhere over the next couple of months.
I’m bullish about stock picking and rotation, and don’t really care about the indices very much.
Have a great weekend. I’ll see you on Monday.
At the time of publication, DePorre had no positions in any securities mentioned.
