“Pop, pop” goes the NASDAQ. The index jumped to a new high after the coronavirus downturn. The tech heavy indexes gained more than 2% on Tuesday. As we’ve mentioned before, the NASDAQ is the Mary of the markets: where it goes, the other indexes are sure to follow.
Meanwhile, the S&P 500 barely cleared the upper level of its coronavirus trading range, but still needs to join the NASDAQ in making a new high. With the index’s relative strength turning north, it should be on to the 52-week high.
The Dow remains within the virus trade box; albeit at the very top. If the Dow can get to the better side of 29,000, it should challenge its all-time and 52-week high as well.
Our market models confirm the market’s rebound as momentum returns to bullish mode following a brief neutral stint. Furthermore, market type and leadership strengthened their bullish scores.
Barring something unexpected, it looks as if buyers have wrestled control from sellers and the odds favor more upside. If the S&P and Dow can find their ways to new highs and join the NASDAQ, it would be an unmistakable confirmation that the bull market lives.
Fundamentally speaking, fourth quarter earnings season has been blah. So far, nearly half of the S&P 500 have released their quarterly financial report cards with 66.96% reporting better than expected numbers. That might sound good, but it’s the lowest beat rate since the second quarter of 2014. The good news is that slightly more than half of the S&P are still on the clock. Hopefully, the number of bullish surprises can get back into the low to mid 70% range.
Better news can be found on the top line of the S&P’s cumulative income statement. To date, 144 of the 224 reporting companies exceeded Wall Street’s revenue forecasts. The current beat rate of 64.3% is considerably higher than the previous quarter’s 58.8%.
As long as sales and earnings continue to do better than predicted, stocks should follow their lead and move higher.
The top five performing sector-based exchange traded funds (ETF) for the last week include:
- ARK Innovation ETF (ARKK) +3.95%
- First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) +2.03%
- Utilities Select Sector SPDR Fund (XLU) +1.07%
- ALPS Medical Breakthroughs ETF (SBIO) +1.06%
- Consumer Discretionary Select Sector SPDR Fund (XLY) +0.74%
Of the five, ALPS Medical Breakthroughs ETF (SBIO) has the most attractive chart. Its price just moved above its 50-day moving average, broke through the top-side of resistance, its relative strength is accelerating, and is on the verge of a bullish technical buy signal, a bullish MACD crossover.
The ALPS Medical Breakthroughs ETF invests biotechnology stocks with market caps of at least $200 million and no more than $5 billion.
Its top five holdings include:
- Acceleron Pharma Inc. (XLRN)
- Bluebird bio, Inc. (BLUE)
- United Therapeutics Corporation (UTHR)
- MorphoSys AG (MOR)
- Immunomedics, Inc. (IMMU)
Like the indexes, SBIO should test it 52-week high as long as the market continues to cooperate.
May all your trades be profitable,