Palantir, Rocket Lab Kill Momentum After Nervous Earnings Reaction

Growth stocks are taking a hit on Tuesday morning as nervousness about the reaction to major earnings reports is building. 

The issue isn't negative news flow. The issue is extended technical conditions that will require some big beats if the momentum is going to continue.

Breadth is still positive, and the index pullbacks are relatively minor, but some of the biggest winners like AST Spacemobile ASTS, Palantir Technology PLTR and Rocket Lab RKLB are under pressure and killing momentum.

In addition, an FDA decision to reject a filing by Replimune REPL for a cancer drug is raising concerns about new leadership that may impose more stringent conditions in some cases. So far biotechnology is performing well but volatility has spiked.

Small caps continue to outperform with a gain of 0.5% and there are still pockets of momentum in "junk" names, but it is a little less aggressive. Stocks like Kohl's KSS and Petco Health WOOF are attracting interest from retail traders.

I cut back some growth names and have raised my cash levels, but I'm not trying to predict a top or a major downtrend. My goal is to increase flexibility so I can take advantage of some deeper pullbacks in leading names. Nvidia NVDA, for example, is filling a gap on its chart at $165.50, and I believe that will present a good lower-risk entry to add to my position.

It is sloppy action out there but there is some surprising strength as well. As I wrote in my opening column, the $1 trillion issue right now is whether earnings will be good enough to keep this uptrend running hot.

At the time of publication, DePorre was long NVDA and ASTS.