Stocks just can’t seem to break free. It’s sort of like driving on the busiest highway during rush hour in a major city: stop, go, sputter, inch forward, stop go… Every time stocks bypass some resistance, triggering a technical buy signal, the indexes pop a little and then suffer a quick setback.
Last week, the NASDAQ got to the better side of 12,600 in a week the index added more than 3%, topping out at 12,809.60. After a nice run, some profit taking kicked in on Friday, which is to be expected. But then, word of a new COVID strain in The United Kingdom hit stocks hard to start Christmas week trading.
The markets got off to a rough start on the English news, but a new COVID relief bill lifted the hopes of traders and pushed prices higher throughout the day. Unfortunately, only the DOW managed to finish above water.
If positive momentum that lifted stocks from Monday’s lows can hold, then prices should head higher if/when the indexes can trade above the day highs of 3,702.90 for the S&P 500, above 30,304.14 for the DOW and 12,751.27 for the NASDAQ. Bulls don’t have much lifting to do to attract buyers.
With little resistance above, just a little nudge and stocks could push aggressively higher to close out 2020. Index investors might think about an exchange traded fund like Invesco QQQ Trust (QQQ) if we’ve made the correct call.
Not surprisingly, technology sectors dominated the top of our performance leaderboard as the NASDAQ set the pace last week. Also, in the not surprising department, First Trust NASDAQ Cybersecurity ETF (CIBR) was number one following news of massive foreign hack of the federal government.
Honestly though, all the best performing ETFs for the past week look so, so overextended. Although stocks are poised to go higher with the slightest of push, a correction has to be forthcoming, maybe to start 2021?
Of the top performing ETFs, Amplify Online Retail ETF (IBUY) is the only I might consider, but only as a short-term trade.
Of all the positions in IBUY, TripAdvisor, Inc. (TRIP) offers the most upside, in our opinion. Obviously, COVID has wreaked havoc on the travel and entertainment industry. However, there is light at the end of the tunnel. With vaccines now available on a limited basis, millions and millions of people who have overcome the infection possibly immune… some experts believe the COVID pandemic could be in the rearview mirror for good, or at least as manageable as the flu, by June 2021.
After being locked up for more than a year, we expect people to get out and a enjoy “freedom” with a new sense of appreciation when the COVID coast is clear.
Between here and there, TRIP’s shares will experience volatility and likely get whacked whenever bad COVID news emerges. Just remember, the market is forward looking, usually trading on the next three to six months of expectations.
It’s not long before June rolls into that three-to-six months window. If the COVID vaccines prove to be effective as we all hope, Wall Street will turn to lagging entertainment stocks before too long, based on our experience.