Bulls jumped out of their foxholes Friday, and unlike the previous session, they fought hard into the closing bell. The Nasdaq 100 finished at 15,751, a gain of 1.9%, states Jon Markman, editor of Strategic Advantage.
The rally for the benchmark was exactly the confidence boost bulls needed following the reversal on Thursday. The advance also puts bears on warning. Professionals are still buying dips, even minor ones. This is a powerful narrative. When buyers step into every meaningful decline and are immediately rewarded with higher prices, they become emboldened. They feel bulletproof.
Armies of confident investors are voracious warriors. They rarely lose. Bears should worry about money flows, too. The S&P utilities sector was down 2% on the week, easily the worst performer among the 11 major sectors. Bears will point to disappointing earnings at large utility firms such as NextEra Energy (NEE), and AES Corp. (AES). Shares for each firm tumbled last week by 4%.
Unfortunately for bears, pros are not selling utility stocks because management had a hiccup. Money is rotating away from defensive sectors, and toward beta. Pros are behind their unmanaged benchmarks, mainly because they have been hiding out in utilities awaiting an economic recession. Now they are getting nervous. They must begin to perform better, so they are buying the dips, especially for big capitalization shares with great liquidity.
The strength on Friday for Tesla (TSLA), Microsoft (MSFT), and Netflix (NFLX) was not a coincidence. After healthy corrections, these shares are no longer extended. Money is coming back in for a second-half rally. The bears will fall in line. They will not resist.
The following important line in the sand for the NDX at 15,932, is the July 19 high. Ultimately, the next important batter between bulls and bears will come at 16,573, the record high.
NASDAQ 100 TIMING: Members were instructed to buy ProShares Ultra QQQ (QLD)—a 2x leveraged ETF that tracks the Nasdaq 100—at $63.00 on June 28. Members sold half of the position on July 19 at $70.59 for a 12.1% gain. Now set up to sell the second half at $75.70 lmt gtc. Set stop at 64.53 stp.
