Sometimes the market acts like an NFL wide receiver trying to “juke” a cornerback. Wall Street throws some head fakes to make you think it’s going to zig when it really wants to zag. With the NASDAQ sitting atop its mountain last week and a looming bullish buy signal, it sure looked as if the index intended to zig higher.
Unfortunately, the Center for Disease Control (CDC) issued a new indoor mask advisory for vaccinated and unvaccinated people, which sent the market into the red. So far, the financial markets have reacted much differently for the COVID-DELTA variant than it did for the original COVID-19 breakout.
Last year, once it was clear the pandemic was here, stocks waterfalled to the tune of 1000’s of points per day. For C-DELTA, the response has been decidedly muted versus last year’s freefall. In our opinion, investors are in wait and see mode.
The DELTA variant has spiked and recessed in six-to-eight weeks in other parts of the world and has been far less lethal. Based on our experience, and the slight dip following rising COVID-DELTA counts, it looks as if Wall Steet expects DELTA to pass and not to be as devastating to businesses, the economy, and to those who unfortunately suffer from it.
Of course, what actually happens will determine if we have a 2020 redo or if traders will focus on government and Fed stimulus to continue pushing prices up, up, and away.
There are some clear lines on the NASDAQ’s chart which could provide early clues on which way stocks are likely headed. As you can see on the chart below, the index is still above its trend line, which is bullish. It’s also within a decently defined trading range.
The first warning sign would be if the NASDAQ breaks below its trendline. It wouldn’t be a bull-killer but should definitely put you on notice. The next warning sign is the bottom of the trading range, which happens to share a zip code with the 50-day moving average. If both get busted, uh-oh.
The upside story is simple, break out of the top of the box, and the market zigs like we thought it would last week.
Index investors might consider Invesco QQQ Trust (QQQ) if the NASDAQ moves north of the box, or ProShares Short QQQ (PSQ) if the index fall out of the box.
A mixed bag of sectors made up the top 10 performers on our leaderboard for the last week. One we have our eye on is Defiance 5G Next Gen Connectivity ETF (FIVG). Five-G isn’t one we’ve seen this high in a while. The ETF just jumped to a new high after spending the better part of 2021 in a fairly narrow trading range, also known as consolidation.
If the NASDAQ makes its way through the top of the box and the rally is back on, then Defiance 5G Next Gen Connectivity ETF (FIVG) could be one of the top performers.
QUALCOMM Incorporated (QCOM) might be our favorite FIVG holding. The chipmaker gapped higher last week on better-than-expected earnings and upwardly revised guidance. Some of the luster came off after Google announced it plans on building its own processors. Big deal, remember Google Glasses?
QCOM should benefit from post-earnings drift, a phenomenon where companies with bullish earnings surprises tend to outperform the market until their next earnings announcement. If QCOM can break through $150, then it should hustle to its all-time high of $167.94. If QUALCOMM can get to the better side of $169ish, it could be in for a solid rally. Investors might consider cutting losses if QCOM closes below $135.