There is a little hesitancy in the market right now. COVID-Delta is in the news and Dr. Fauci says the vaccine resistant Lambda is soon to take the headlines. All of the renewed COVID talk put Wall Street on pause for the last few days.
The lack of direction has left the NASDAQ stuck in neutral the last two days while drifting closer to its ascending trendline. However, last week’s action took the tech-oriented index to a new high. The question for stock players is whether this is a pause before the pop or a rollover at the top?
Our momentum model suggests it could be choice A: the pause before the pop. Short-term momentum is on the upswing despite a couple of days of narrow, range-bound trading. Meanwhile, mid-term momentum just pivoted higher and long-term measurements are strongly pointing northbound.
Of course, nothing is perfect. However, it’s been our experience that stocks tend to move up when the overall momentum model’s reading is bullish, and its three readings are headed higher. Since nothing is absolute, investors might view 14,600 as the first yellow flag for the NASDAQ, 14,400 as a warning flare, and 14,200 as the last safety net before we possibly head for big trouble.
For now, our opinion is stocks are more likely to breakout than breakdown. Index investors might consider an exchange-traded fund (ETF) like Invesco QQQ Trust (QQQ) in the event we’ve made the correct call and a pop follows the short pause.
Financial stocks roared to the front of the pack last week. The top four performers were Regional Banking, Large Banks, Community Banks, and Financials. Semiconductors were the first non-financial sector to make the list, rounding out the top five. Brokers and Insurance added to the financials’ strong performance, finishing in the top eight.
The charts for SPDR S&P Regional Banking ETF (KRE) and SPDR S&P Bank ETF (KBE) are similar and pay similar dividends. Either could make sense for investors looking to add money to the banking sector.
Silvergate Capital Corporation (SI) is the number one holding for SPDR S&P Bank ETF (KBE). Silvergate is a sneaky crypto play as the company is a leading provider of innovative financial infrastructure solutions and services to participants in the nascent and expanding digital currency industry. SI leverages its technology platform and management team’s expertise to develop solutions for many of the largest U.S. digital currency exchanges and investors around the globe.
The stock has been as high as $187.86 in the past 52 weeks and Wall Street has a consensus one-year price target of $154.57. Shares have traded in a range from $120 on the top side to $90 on the downside with a pair of brief breaches since May. SI is trading at $117.21 as we type. If bulls can carry it through resistance at $120, then it could be poised for a nice rally.