September 2, 2020

Stocks continue their assault on the record books thanks to market participants crowding into the Big Five technology kingpins. As of yesterday, the Nasdaq had booked a 74% gain for this 24-week-old bull market vs. the 84% mark logged in the final 24 weeks of the 'Nineties bubble era.

Heady stuff, indeed.

Tuesday's explosive breakouts in two leaders, Crowdstrike (CRWD) and Docusign (DOCU), occurred one day and two days ahead of their respective earnings reports. This is believed to be a mark of complacency and a sign of froth.

There has been a pattern of late whereby these reports contain just a few actionable issues. This is then followed by a heap of additions to the Focus List for the ensuing non-report days. For example, there were three issues discussed in Sunday's report, eight in Monday evening's Focus List, from which six broke out, and six fresh "reinforcements" added to Tuesday evening's list.

I believe something similar happened the previous week as well. Basic subscribers: Please note that the cost difference to have five days a week coverage with a premium plan is $18 a month (with quarterly discount).

Once again, nearly all growth-stock leaders are materially extended and do not present attractive entry. It is to be noted that should the Nasdaq pull back by just 5%, it is likely that many growth titles will decline two to three times that, or 10% to 15%. This is similar to the 1.5-2.5 times mentioned by Bill O'Neil in his book.

Another risk is that a slew of upbeat economic reports may entice market participants to rotate out of growth and into value/cyclical. The important thing to remember is that stocks move substantially quicker on the downside than they do on the upside. This means that weeks of gains can be wiped out in a shorter period of time should the market pull back.

Let's remain true to this trend, yet be proactive enough to have an exit plan worked out for each stock you hold. As always, using the moving averages as guides is probably the best course to take.

The following charts may be expanded by clicking on them.

Niu Technologis (NIU)

Pinduoduo (PDD)

Wix.com (WIX)

In sum, this is a narrow advance dominated by the Big Five technology behemoths. Let's be open-minded and flexible enough to realize that at some point the Nasdaq will have to correct. Exit plans for each stock should be worked out now while the waters are calm, as opposed to reacting to a downdraft in the middle of a trading session when emotions take over.

Kevin Marder

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All stock charts created using MarketSmith unless otherwise noted. ©2020 MarketSmith, Incorporated. All other charts created using TradeStation. ©2001-2020 TradeStation Technologies. All rights reserved.

The views contained herein represent those of Marder Investment Advisors Corp. At the time of this writing, of the stocks mentioned in this report, Marder Investment Advisors Corp., Kevin Marder, or an affiliate thereof held no positions, though positions are subject to change at any time and without notice. Estimate data provided by FactSet. Expected earnings release dates provided by EarningsWhispers.