Time to Protect Your Gains as Netflix Dip Warns Momentum Is Fizzling
There has been significant decline in various high-flying sectors, including nuclear, bitcoin rare earth and data centers.
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The outstanding speculative action in small stocks on Monday disappeared on Tuesday. The failure to follow through on such strong action is disappointing and suggests that the action will stay volatile and uncertain as we contend with earnings season.
The indices held up well, with the DJIA gaining more than 0.5% due to earnings from 3M (MMM) and Coca-Cola (KO) . The Magnificent Seven (MAGS) was flat, and small caps lagged, with the Russell 2000 losing 0.4%. Breadth was just slightly negative, with 51% of stocks declining.
What was most notable about the action was the significant decline in high flyers across various sectors, including gold, bitcoin, nuclear, rare earth, data centers and quantum computing. Traders are adopting a stronger defensive stance and are not trusting momentum to last.
There still is no major technical damage to the indices, but the pockets of hot action are not so hot, and the action on Tuesday suggested that sentiment is starting to erode. Strong earnings may help, but it is crucial to focus on protecting gains and preparing for what may develop next.
Netflix (NFLX) earnings just hit, and the initial reaction is negative, with the stock down 6% on the news.
Have a good evening. I’ll see you tomorrow.
At the time of publication, DePorre had no positions in any securities mentioned.
