In January we saw Netflix and Facebook crash on their earnings reports. This week we saw Netflix crash again after it reported earnings that showed that they lost 200,000 subscribers. But the market tried to ignore that on Wednesday and went up. The stock market came into this week trading right on support, so stock market bulls bought, but then the sellers came in hard on Thursday to close the Nasdaq below its lows of last week to create a failed rally.
Now the bears may get the upper hand.
It’s a tough market to make money in either way and really it’s hard to trade the market averages and these fad tech stocks trading below their 200-day moving averages with broken charts.
I’m not recommending that you try.
What I would suggest is to stick with winning tactics that matter in any market environment.
And one of those key tactics is to recognize that what lags the market averages tends to dump hard on market declines and corrections and to beat the market the best thing to do is be trading and investing in those things that are already beating the market.
Winning is as simple as that.
As you can see from the relative strength plot on this chart, the Nasdaq is lagging the S&P 500. AAPL is doing ok, but Facebook, Netflix are now things to avoid.
But they are not the only “FANNG” fads you need to avoid.
Now Google is badly lagging the S&P 500 and poised to breakdown too, as you can see from this chart.
GOOG even closed right on its February low.
NVDA is already making a new low for the year.
So, what is good to buy?
Don’t take your eye off commodities as they are still outperforming.
What is hurting so many stocks now is the fact that corporate bonds are falling in value as you can see from this ETF which holds them.
When interest rates go up and yields go up the value of bonds fall.
Rising yields are increasing the borrowing costs of highly indebted companies, which hurts them and the overall stock market.
But when yields remain so far below the rate of inflation it’s still an inflationary environment and so the underlying bull trends remain in commodities and precious metals and will remain that way for years to come.
This is the big picture to think about.
How does Bitcoin play in that?
It doesn’t, because it only trades up and down with the Nasdaq.
Crypto is dead money.
-Mike
