August 4, 2021

The averages continue to give a good account of themselves as market participants ready themselves for Friday's NFP report.

For the past five weeks, the Nasdaq has performed in line with the S&P. The growth stock barometer has benefited from softer bond yields as worries over higher inflation down the road ebb. This has made the Big Five attractive to institutions following the companies' recent earnings reports. It is logical to expect the rally to continue as long as the Big Five continue higher, on balance.

Subsurface, things have improved modestly. Today's action in Watch List issues, the Ark Innovation ETF (ARKK), and the IBD 50 ETF (FFTY) all showed good tone. Recent earnings reports have sparked some momentum gap-ups which are being monitored.

Constructive bases in technology are still scarce, but an open, flexible mind is maintained so as to capitalize on any change for the better. Niche growth setups are hard to come by.

Semiconductors are expected to offer the best near-term opportunities, and the group has outperformed for six sessions in a row. The following chart shows the RS line angling higher in resolute fashion. Four names in the group are discussed below.

The following names are believed to offer the most attractive reward-to-risk potential for our style of momentum-based speculation

Applied Materials (AMAT)

Facebook (FB)

KLA (KLAC)

Nucor (NUE)

Power Integrations (POWI)

Direxion Semiconductor Bull 3x ETF (SOXL)

Trupanion (TRUP)

In sum, things improved modestly today, though more work needs to be done on growth-stock base building, excluding the semis, which offer the best near-term potential. Let's maintain an open mind with no preconceived notions as to what this market can do.

Kevin Marder

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Money management and risk management video (20:27)
Bread and butter pullback video (11:10)
System R

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